UBS to disclose 4,450 Swiss accounts

Under an agreement negotiated by the governments of Switzerland and the U.S., the IRS will get access to less than one-fourth of the accounts held by Americans at Swiss banking giant UBS AG that the bank itself previously acknowledged were kept secret from U.S. tax authorities.

It’s a deal the Swiss and outside banking analysts say will preserve Switzerland’s centuries-old reputation for secrecy and security, but also gives U.S. authorities a start in pursuing wealthy tax scofflaws.

The U.S. agreed to drop a lawsuit demanding that UBS turn over information on an estimated 52,000 American citizens’ accounts — 19,000 of which the bank previously told Congress were “not disclosed” to the IRS. In exchange, the U.S. will get information about an estimated 4,450 UBS accounts that the Swiss government says will meet its requirements for release if evidence of “tax fraud and the like” are shown.

“The UBS settlement is at most a modest advance in the effort to end bank secrecy abuses, tax haven bank misconduct, and the tax haven drain on the U.S. Treasury,” said Sen. Carl Levin, a Michigan Democrat and the chairman of a subcommittee that investigated UBS.

“It will take a long time before we know whether this settlement will produce meaningful gains due to treaty procedures which are complex, depend upon the Swiss government to carry out, and open the door to potentially lengthy appeals,” Mr. Levin said.

The IRS, however, called the settlement “historic,” noting that the accounts it expects to receive once contained a total of $18 billion.

“This is no mere keyhole into the hidden world of bank secrecy,” IRS Commissioner Doug Shulman said in a conference call with reporters Wednesday morning. “This agreement represents a major step forward with the IRS’ efforts to pierce the veil of bank secrecy and combat offshore tax evasion.”

Daniel M. Berman, a tax law professor at Boston University Law School, said the agreement with the Swiss should put an end to the expectation that an American citizen can avoid paying taxes simply by putting money in an account overseas.

He said the agreement also shows the Swiss government could be willing to release this kind of information in the future and could put pressure on other tax havens to scale back their protections of U.S. tax cheats.

“I think the Justice Department would have rather had twice as many names as they’ll get, but they still get a lot,” he said. “I think this is enough names that it indicates a sea change, it’s enough names that it indicates ‘you can’t just get away with it.’ ”

But George Clarke, a Washington tax attorney, said the agreement will have little effect on Swiss banking secrecy, an opinion that was also shared by the Swiss government, UBS and the Swiss Bankers Association.

“The Swiss pushed back pretty hard and I think that was effective,” Mr. Clarke told The Washington Times. “If you’re a person who really wants to roll the dice, and fly money over to Switzerland in suitcases, I don’t know how the U.S. gets that information from this treaty process.”

Earlier this year, UBS and the U.S. reached a $780 million settlement to resolve accusations that UBS helped Americans hide money from the IRS. As part of the agreement, UBS turned over information from 250 accounts held by Americans that the Swiss government had linked to tax fraud, which meant releasing them didn’t violate that country’s banking secrecy laws.

But the U.S. wanted more — information from as many as 52,000 accounts.

The IRS sought a court order from a U.S. judge to force UBS to turn over the information; the agreement effectively ends those legal issues, though the IRS now stands to receive information from fewer than 10 percent of all accounts held by Americans.

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About the Author

Ben Conery is a member of the investigative team covering the Supreme Court and legal affairs. Prior to coming to The Washington Times in 2008, Mr. Conery covered criminal justice and legal affairs for daily newspapers in Connecticut and Massachusetts. He was a 2006 recipient of the New England Newspaper Association’s Publick Occurrences Award for a series of articles about ...